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1. Suppose that a randomly chosen stock has on average a standard deviation of 0.32 and a beta of 1. The market portfolio has a

1. Suppose that a randomly chosen stock has on average a standard deviation of 0.32 and a beta of 1. The market portfolio has a standard deviation of 0.17.

If the single index model is correct, what is your estimate of the standard deviation of an equally-weighted portfolio of five (5) randomly chosen stocks?

Enter your answer in raw decimal form to four (4) decimal places.

2. On 1 April, you purchased 400 shares of GameStop (GME) at $100 per share on margin. There was a 60% initial margin, which you paid in cash.

The price rose to $140 per share, and you closed out your position at this price (i.e., sold the shares and paid off the margin loan).

Your broker charges $10 per trade. Assuming there were no other costs or taxes (e.g., margining costs or additional capital for margin calls), what was your holding period return on this investment?

Enter your answer in raw decimal form to four (4) decimal places.

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